Barron’s Bullish Picks Trailed Market in 2018, Bearish Ones Shone

In a year when most tradable assets declined in value, Barron’s had a mixed record of pointing investors toward the winners and warning them away from the losers. Our bullish picks trailed their benchmarks by about a percentage point. But our bearish calls were often spot-on, correctly diagnosing problems for several companies whose stocks subsequently fell.

In the interest of accountability and transparency, Barron’s tracks its stock picks in the magazine and online. The performance of those stocks is measured against the relevant benchmark—the S&P 500, S&P MidCap 400, and Russell 2000—depending on the size of the company.

Last year was a tough one for equities, and our picks had it slightly rougher. Shares of the 71 companies we wrote about bullishly fell 10.5% on average, versus 9.5% for their benchmarks. Add back dividends and we were down 9.4%, versus a drop of 8.5% for the benchmarks. The S&P 500 lost 7.4% over the same periods.

The report card measures the performance of shares from the last trading day before publication to the end of the year. We periodically write follow-ups to stories; if a writer advises investors to take gains or cut losses, or if a company is acquired, the price is frozen at that level on the report card.

Articles that mention several stocks or entire sectors aren’t tracked—our warning to investors about high-priced marijuana stocks isn’t in the list, for instance. The picks are also tracked in real time at Barrons.com.

Among our top calls this year was a bullish one on oil refiner Andeavor, which was taken over by
Marathon Petroleum
(ticker: MPC) in October for 54% more than the stock was fetching when we wrote about it in late March.

We also told investors, almost a a year ago, that they could get a “Dell discount” by purchasing Dell Technologies Class V tracking stock, which offered a cheap play on
VMware
(VMW), then majority-owned by Dell. The shares rose about 50% because of the appreciation in VMware during 2018 before Dell finally bought out holders of the tracking stock for a mix of cash and stock worth about $107 a share.

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But Barron’s also picked several stocks that trailed the market considerably. Among the hardest-hit sectors last year were industrials and financials. We clearly recommended too many of those.

Home builder
Hovnanian Enterprises
(HOV) fell 69.5% from the time our story was published in February through the end of the year, as its results deteriorated amid a tough housing market. It was recently trading for just 63 cents, versus $2.13 when the article ran.

Delphi Technologies
(DLPH) which makes parts for combustion-powered and electric engines, plunged 68.1% in the months after our July story. Its CEO left after less than a year as revenue weakened, and, just last week, the company cut its dividend.

While too many of our bullish picks missed the mark, our bearish selections were mostly well-timed. Last January, we warned investors about
Snap-on
(SNA), which was becoming increasingly reliant on its financing arm for profits. The company’s auto tools fell out of favor, causing the shares to decline 20.3% after our article was published.

A debate raged about the prospects for
General Electric
(GE) all year. Barron’s offered its view in February, when the stock was trading at $15.05 and some value investors were looking for a reason to get back in. Even though the shares had been cut in half, we urged investors to wait before pouncing, given weak trends in GE’s power business and its still-opaque balance sheet. By the end of the year, the stock price had been halved again.

Other bearish calls that proved prescient included those on pet insurer
Trupanion
(TRUP) and mobile-payments company
Net Element
(NETE).

2018 Review

Our 71 bullish picks trailed the market, but we hit the mark with most of our bearish stories.

1 Acquired by Marathon Petroleum on 10/1/18. 2 $107 is the value received by DVMT holders who elected to receive cash in the Dell buyout on 12/28/18. 3 Barron’s said to take profits on 11/12/18. 4 Acquired by AT&T on 6/15/18. 5 Prices in local currency; returns in USD.

Bearish Picks

Correction:

An earlier version of this article misstated the percentage decline in shares of Snap-on following a bearish Barron’s article in January. It fell 20.3%, not 59%. An accompanying table repeated the error. Based on the 20.3% decline in its shares, or -18.6% in total return, Snap-on should have been No. 6, not top of the bearish picks.

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